Why cost optimization is the way of the future
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The document outlines a webinar focused on the distinction between cost-cutting and cost optimization, emphasizing the importance of long-term growth strategies during crises. Key presenters from Symptai Consulting discuss how businesses can drive value through continuous cost optimization efforts while utilizing tools like digital transformation and data analytics. It also includes practical approaches for identifying areas for concern in business expenditures and maximizing operational efficiency.
Why cost optimization is the way of the future
- 2. Overview Webinar Objective: Today we want to discuss the differences between cost-cutting and cost optimization and why we should be looking to make decisions for long term growth even in a time of crisis
- 3. The Presenters Korah Jane Jude Korah Jane Jude is the Business Development Manager at Symptai Consulting with over 15 years of experience in business strategy, consultative sales, operational execution and project coordination. Alicia Perez Alicia Perez is the Director of IT Audit & Digital Transformation at Symptai Consulting with over 15 years of experience in Business Assurance, IT Audit, Advisory, Enterprise Information Management and Governance. Alka Jain Alka Jain is the Director of Business Assurance at Symptai Consulting with over 20 years of experience in Information Technology, Accounting and Management across varied sectors including government, financial, utilities, retail, and distribution.
- 4. Key Concepts
- 5. Creating Value Value - the regard that something is held to deserve; the importance, worth, or usefulness of something. Cost – an amount that has to be paid or spent to buy or obtain something www.dictionary.com Business 101 • Cost > Value = Business Fails • Cost = Value = Opportunity for Shifts • Cost < Value = Business Succeeds When macro conditions negatively impact value - cost reduction becomes focal: Cost Cutting - immediate, direct one-time actions aimed at reducing corporate expense levels. Cost Optimization – continuous effort, specifically designed to drive spending and cost reduction while maximizing business value.
- 6. ValueDriverTrees Profit Revenu e Cost Price Quantity Cost Drivers Direct labor hours Sq. Ft. Occupied Downtime Drivers Economies of Scale People Pricing Strategy Quantity
- 7. CostOptimization Key Driver: Truly See the Business (Data Analytics & Visualization) Digital Transformation / Supply Chain Optimization • Affordability • Convenience • Effective (true customer obsession) Technical Capabilities (ex. Cloud) • True variable cost • Scalability • Leverage economies of scale • Focusing on business core strength Outsourcing • Resource optimization by focusing on core strengths • Higher return on incurred costs Levers Commitment to Win • Ability to execute on the hard decisions to make your business viable
- 8. Questions?
- 10. Identifyareasof concernand contributingparties Profit & Loss Statement (USD) 2020 ('000) JAN FEB MAR Revenue Stream 1 1,000 1,200 900 Revenue Stream 2 500 600 700 Income 1,500 1,800 1,600 Cost of Goods Sold 500 600 450 Gross Profit 1,000 1,200 1,150 Expenses Advertising & Promotion 50 60 90 Depreciation 10 12 15 Insurance 5 6 7 Maintenance 70 120 80 Office Supplies 40 35 45 Rent 15 15 15 Salaries, benefits & Wages 200 220 210 Telecommunications 10 12 13 Travel 90 50 80 Utilities 20 25 27 Other Expenses 5 4 6 Total Expenses 515 559 588 Earnings Before Interest & Taxes 485 641 562 Interest Expense 4 6 3 Earnings Before Taxes 481 635 559 Income Taxes 25 38 32 Net Income 456 597 527
- 11. Ask Questions Are expenses aligned with strategy? Are business processes efficient? Is business value being maximized?
- 12. Choosea businessmodel thatworksfor you Information Technology Value Maximization - Unused user licenses - On premises vs Cloud solutions Manufacturing Standardization - Simplify processes - Eliminate wastage Business Development Growth - Innovative Products - New Markets Services Automation - Efficiency - Lower cost No one fix it all solution - the approach can vary within the organization.
- 13. Questions?
Editor's Notes
- #12: Identify drivers – innovation, efficiency, automation